TUPE reform - Government confounds expectations

On 5 September the Government produced its response. to the consultation on the reform of the Transfer of Undertaking Regulations (‘TUPE’) which ran earlier this year. The response sets out the areas in which the Government is intending to go ahead with changes to TUPE and it is clear that some reforms that were widely expected will not be taking place.

Most notable amongst these is the Government’s decision not to repeal the rules on service provision changes (SPCs). These rules, which date from 2006, ensure that TUPE applies whenever a service is contracted out, brought back in house or moved from one provider to another.

The Government consulted on repealing the SPC rules on the basis that they do not originate in the EU Directive which gave rise to TUPE and there was a perception that they amounted to unnecessary ‘gold-plating’. This means that the Government would have had a freer hand in amending them that it has in other areas of TUPE. However 67 per cent of respondents to the consultation expressed the view that repeal of the SPC rules would create greater uncertainty and make business transfers more difficult. The Government appears to have heeded that concern. However it will amend the wording of the rules so that they will only apply when the activities carried on after the change are ‘fundamentally or essentially the same’ as those carried on before.

A series of other changes will be made, many of which will be welcomed by employers. In particular:

TUPE will be amended to provide that changes in the location of the workforce following a transfer can be within the scope of economic, technical or organisational reasons entailing changes in the workforce, thereby preventing genuine place of work redundancies from being automatically unfair;

The requirement on a transferor to provide ‘employee liability information’ will remain, but the information will need to be provided earlier – 28 days before the transfer, rather than 14;

The Government intends to amend the TUPE Regulations so that one year after the transfer, the restriction on variations to contract (in Regulation 4) will no longer apply in respect of changes to terms derived from, or incorporating, collective agreements, provided that any transfer-related change is no less favourable overall. The Government will also amend the Regulations to expressly provide for a static approach to the transfer of terms derived from collective agreements (i.e. only those in existence at the date of the transfer will be binding on the transferee);

The Government will amend the Trade Union and Labour Relations (Consolidation) Act 1992 to make it clear in statute that TUPE consultation which begins pre-transfer can also count for the purposes of complying with the collective redundancy rules, provided that the transferor and transferee can agree and the transferee has carried out meaningful consultation;

Micro-businesses (those with fewer than 10 employees) will be permitted to inform and consult directly with their employees rather than having to do so through union or elected representatives;

There will be some clarification to the wording of the rules governing changes to terms and conditions and transfer-related dismissals.

It is the Government’s intention that the new Regulations will be laid before Parliament in December 2013. We will provide further updates once the draft regulations have been published.